CIPD outlines road map to EU enlargement success

The arrival of migrant workers from the EU accession states will help to relieve upwards pressure on wages, without creating downward pressure, according to Dr John Philpott, Chief Economist at the Chartered Institute of Personnel and Development and one of the countries leading thinkers on recruitment and the workplace.

Dr Philpott has issued repeated calls for Government and businesses to ensure that under-used sources of labour - such as economic migrants - are engaged to solve the severe recruitment shortage currently facing UK plc.

Unveiling a new framework document on the eve of EU expansion, Dr Philpott welcomed the expected benefits of EU expansion and the safeguards put in place by government to manage migration. He also warned that excessive EU regulation in the new accession states could stifle the benefits in terms of economic growth that enlargement should otherwise bring.

Dr Philpott, author of the framework, explains:
EU enlargement is undoubtedly good news for business in order to meet the severe recruitment challenges facing UK organisations. As our research shows, the vast majority of UK organisations have recruitment difficulties, so the arrival of economic migrants from the EU accession countries able to fill job vacancies should be welcomed so long as they meet the requirements of the governmentís registration scheme.

And although opinion polls show that 1 in 3 UK workers are concerned that an influx of new EU migrants will depress wages, in todayís tight labour market the main effect will be to contain upward pressure on wage costs. The impact of EU enlargement on the UK jobs market will thus be one of goods news for employers and no threat to workers. However, to maximise the impact of enlargement for the EU economy as a whole Brussels must not place too great a burden of regulation on employers in the accession countries and adopt a far more dynamic approach to boosting enterprise throughout the enlarged EU.

Summary:

Good news for employers and HR:
With unemployment at a thirty year low, and many employers desperate to fill job vacancies at all skill levels, EU enlargement offers the prospect of a welcome increase in the UK labour pool. While some forecasts greatly exaggerate the scale of the likely inflow of migrants from the new EU member states, it is probable that 50,000 workers from these states will enter the UK jobs market between now and the end of 2005. Many will be professionals filling skilled jobs in management and finance, but there will also be large numbers seeking routine employment offering rates of pay well in excess of what they can obtain at home.

Language barriers may prevent some from undertaking front-line roles in those parts of the service sector where good customer relations are essential. But they will be available for shelving and packing jobs in shops and supermarkets as well as manual jobs in manufacturing agriculture and horticulture.

Avoiding the potential risks to UK workers and jobless people:
Although opinion polls show that 1 in 3 UK workers believe that an influx of new EU migrants will depress wage levels, in todayís tight labour market the main effect will be to contain upward pressure on wage costs. Things could be different if most migrants flooded into just one or two sectors, which is why the government has rightly introduced an interim worker registration scheme to monitor the type and location of jobs being taken by workers from the new EU states. This is a sensible move, enabling the government to impose restrictions on entry in the initial period following enlargement if the labour market comes under undue strain.

The registration scheme will help employers fill job vacancies while at the same time providing migrants with all the rights and job-related benefits that should be available to UK and EU citizens. Similarly, restrictions on migrantsí access to non-work related benefits will ensure that migration from the new member states does not run counter to efforts to help the millions of jobless UK residents - many of whom are disadvantaged people from ethnic minority groups who find themselves at the back of the job queue - move off welfare and into work.

Making sure enlargement boosts growth and jobs throughout the UK: In anticipation of the business advantages of EU enlargement in terms of a larger market, increased economies of scale and the ability to create new supply chains, international businesses, including some from the UK, have been investing in the 10 new member states for over a decade to take advantage of their untapped potential. This inward investment has not only helped raise growth rates but also improved the level of management expertise, and provided access to new product and process technologies. This holds out the promise of future sustained growth in the accession countries (enlargement perhaps adding up to 2 percentage points to the annual growth rate in each country), which will in turn boost demand for the exports of existing EU member states.

But care must be taken to ensure that this potential is not stifled by EU regulations. The accession countries are required to adopt the EU acquis - ie detailed laws and rules adopted on the basis of the EUís founding treaties - on employment and social policy. The rational is that enforcing EU employment directives in these countries will aid capital movement and inward investment within an enlarged EU since investors will face a broadly common regulatory environment. In addition, existing member states also stress that enlargement must not lead to ísocial dumpingí in order to allay concern that the candidate countries will attract investment and jobs away from the more developed EU member states. It will be vital, however, to ensure that regulation does not put the economies of the new member states under excessive strain.

In a globalised world economy inappropriate regulation could be penalised by a loss of investment from the 10 new EU member states to low cost countries outside the EU. While this is a potential problem for the EU15 as well, the accession countries, given their current state of economic development, are far more exposed to competition in markets for standardised products where cost considerations are most important. Concern of this sort does not of course mean that the accession countries should be exempt from EU regulation but does provide additional impetus to sensible structural reforms designed to improve the competitiveness of the EU economy as a whole.